Bankruptcy Options Usually Recommended By Lawyers

Bankruptcy is something that often becomes an option for people

, companies or entities that have incurred debts which are difficult to resolve or pay back. It is a legal state that has to be officially declared by a court and is sought after by the person who owes the debt. It is a matter under the jurisdiction of the federal government and may be governed by state law as well. By voluntarily filing a petition, the person in debt initiates his or her state of being considered bankrupt and is relieved from debt through different resolutions. Although there is what is called a Bankruptcy Code, which has six different plans for debt relief, there are two common solutions to owing money that are often recommended by the lawyers:

- Chapter 13

This option is often declared for individuals. It entails a reorganization of a person's finances in such a way that some part of any future income will be allotted to paying back the debt that he or she owes. This form is usually reserved for people who are assured of having a way to earn income, even though he or she is in debt. The means of earning can be anything from a steady job to ownership of a small business, but it usually entails some form of current employment. For this form of debt relief, there are limits to the amount of debt that is to be considered by the court as admissible for this to be declared. A sole proprietor or any individual is allowed to file for this form of bankruptcy to pay off debts in full or in part, whichever is manageable.

The repayment scheme that is often proposed is based on the income that the individual or small business owner earns monthly. The program may take over three to five years to implement, in order to fully or partially pay back what he or she owes. Factors considered include the monthly income earned and the expenditure that the individual accrues in a month's time. Generally, the repayment scheme should not exceed five years. The person who owes the debts may keep most or all of his or her property, despite owing a lot, because the monthly income assures creditors of eventual repayment. The proposal needs to be approved by both the court and the creditors.

- Chapter 7

In this form of bankruptcy, the person who owes his or her creditors usually submits any nonexempt property to a court-appointed trustee to liquidate in order to pay back debts. The trustee will distribute the proceeds of the properties to the unsecured creditors that are after the individual or company. The person who owes the money will then be granted a discharge from the debt if he or she has behaved well during the entire proceedings. A person can only declare bankruptcy in this form once in an eight-year period of time. Each state has different exemptions when it comes to these cases.

by: Anders Abadie

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